China Shows Who the Real Boss Is at USA Inc.

The nice thing about owning your own business is that you get to call the shots. Want to take the day off? Take the day off. Want to reupholster the office in pink, candy-striped vinyl? Go right ahead and have at it.

Along the same lines, I give you China — an ever-increasing stakeholder and now permanent board member at USA Inc.

Over the past few years the Chinese have plowed over $2 trillion into USA Inc. And since joining the management team they have been a bold and aggressive partner in shaping the company’s policy both domestically and abroad.

One can only sympathize with the outranked managing director (President Obama) as he tries to keep USA Inc. employees (that would be us) satisfied, while at the same time keeping the Chinese members of the board of directors happy as well.

Case in point: Manager Obama flip-flopped recently and declined to cite China as a country that manipulates its currency to gain unfair trade advantages — which plainly it does.

Just two months ago, Manager Obama said the same thing himself through USA Inc.’s chief financial officer, Tim Geithner.

“President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” Geithner wrote, adding that Manager Obama would “aggressively use all the diplomatic avenues open to him to seek change in China’s currency practices.” He also said that “countries like China cannot continue to get a free pass for undermining fair trade principles.”

Well, that was two months ago — back when Chinese activity in USA Inc. was static. Now that they have agreed to take an even larger stake in the company, well, you can see the dilemma faced by Manager Obama as he struggles to keep USA Inc. afloat.

He takes the concerns of the Chinese board members very seriously; he recently sent out his top sales exec, Hillary Clinton, to convince the Chinese to buy more stock (Treasury bonds) in USA Inc. Thankfully, they agreed, so Americans can continue to buy more products from China Inc.

The rationale (lie) Manager Obama gave for his changed view of Chinese currency manipulation is that China has been allowing their currency value to rise along with the dollar. Wow, how generous the Chinese are — if the dollar goes up or down due to market factors, they have agreed to manipulate theirs along for the ride.

The union of American manufacturers (once again, that is us) contends that even with the pegged rise in the value of the Chinese yuan with the dollar, it is still undervalued by 20 to 40 percent against the greenback. But hey, what’s wrong with a little manipulation between fellow USA Inc. execs?

And not only is China doing as it pleases with its currency; it is also starting to open up independent China Inc. franchises in America’s own backyard — South America. Never would we have seen that happen ten years ago, but welcome to the new world.

In fairness to the Chinese, their position on the USA Inc. board of directors is still inferior to Japan — which has by far the largest stake in the company. That is why Japanese Prime Minister Taro Aso was the first foreign leader to visit the White House and the first foreign leader to receive a visit from Manager Obama.

But the difference between China and Japan is that only one of them is positioning itself to be the world’s next CEO.

Bobby McGill is an American journalist based in Asia. He can be reached through his website at www.idlewordship.com.

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1.
westerncanadian

Stick a syringe into a man’s arm; run a rubber tube from the syringe into his mouth. Sucking on his own blood will keep the man alive for a while. Then the fainting fits will come and the man will die unless someone feeds him. That’s one analogy for socialism.

The President’s stimulus program is just like sticking a giant syringe into the arm of the USA and sucking on it’s own wealth. China, Japan and others can’t afford to let the patient die, so they will feed him. However, they will increasingly demand more for their food.

The only solution that I can see is to pull out the syringe (stop destroying wealth); grow food again (concentrate on creating wealth); go on a diet and starting working out (US government lives within it’s means by cutting expenditures, cuts corporate and business taxes, raises personal income taxes for the 45% that don’t pay any taxes any and maybe also for the other 65% that do pay taxes.)

How else can the US start paying off it’s debts and become free again?

exactly what is stopping the USA from the same outreach to South America and other nations..we cannot have it both ways. We dont want to foster trade, but we dont want anyone else too either….the world does not work that way. A vacuum in trade will be filled, if not by USA, then by whomever…in this case China.

China has agreements with 5 trading Nations to use the Chinese Dollar to settle international trade in the last 3 years. If the US had not been so close minded and reached out to these Nations, they would not have been forced to seek alternatives to the US Dollar. If this trend keeps up, the USD will be worthless in a decade.

The Dollar is collapsing because there is nothing to support it; massive debts created in last 12 years, banking system allowed to run amok, no oversight or regulatory body in place. Instead of taking over the banks and instituting common sense in managing them, we threw trillions of USD at them…and have set the the stage for massive inflation in the USA within the next 18 months
If the US does not get its butt in gear quickly we are watching the demise of USD and rise of RMB to settle international trade debts.

The Japanese yen is not worthless, yet the national debt is 180% of GDP, about three times that of the US, even after 0bamarama (though that could still change for the worse). Panic about the USD should be kept in check.

Chinese demographics are ugly, as in Japan (shrinking), South Korea, and Europe (Italy begins shrinking this year, I believe). The Chinese Communist Party will be obliged to pay for all those elderly who have no children (or just single male descendants). Great simplifications here, but China is a reinforced cardboard tiger. It has problems that many choose not to see, but I am happy to credit them with how things have gone economically since Deng Xiaoping.

The Chinese don’t worry about buying votes like the Socialist…err..Democratic party does. Democrats rely on the reliable tax-paying, hard working middle class to keep taking it in the shorts trying to pay taxes, bills and raising families while the socialists are busy spending and borrowing trillions from our enemies in paybacks to their socialist friends.

They don’t believe that the end will ever come. I believe November 2010 is the last chance for the US before calamity ensues. It may be too late. But the brakes must be put on the Obama train wreck, RINOs must be voted out and SOMEONE with basic intelligence must be elected to try and save us from disaster. I am very scared.

- The new budget plan will require borrowing $150 billion a week, mostly from China.
-Debt is auctioned at the Bureau of Public Debt.
-The number of participating lenders was as high as 45 a year or two ago – but has now decreased to 16.
-The debt burden increase is so enormous that it is now more than a fiscal and monetary issue, it is a moral issue/national security issue.
-The Treasury Department reports that the net worth of the United States Government is now negative $43 trillion.
-A national banking crisis/bankruptcy occurs instantly when the number of buyers at these debt sales reaches zero.

China now basically owns our foreign/domestic policy. If we do anything against their wishes, they stop buying our debt. The debt accumulated by the United States Government did not happen over the past 8 years or the past 16 years, or 12. It has happened over a period of 80 years. Nearly all representatives/senators/presidents are to blame, including millions of Americans who keep begging for more spending as a solution to our problems. The present administration while despicable, is not solely to blame either – they have simply multiplied our debt in a very short time rather than work to reduce it.

Since 1913, when the United States government transferred power to coin and Value its currency to the Federal Reserve, a multi national group of Bankers. Since that day the US financial system has been on a slow steady spiral downward.

The USA refuses to consume less than it produces. So it runs a deficit. Obama is pumping that deficit up to 15% of GDP . Where does the deficit money come from ? It must either taxed , borrowed or printed (counterfeited) . Clearly we have chosen to counterfeit our way to prosperity. The fed creates dollars and buys treasury debt. You cant expect existing holders of dollars or treasuries (like the Chinese) to be pleased with the reaming they taking. The world will move away from the dollar because it is a cheat . When that happens inflation away . Then the federal government will get smaller , not because it wants to, but because it is broke.

P.S. China is no more a manipulator of their currency than any other issuer of fiat currency is . The manipulator crap is just to try to push them around, but since we are broke and they aren’t that doesn’t work any more.

At this point China’s refusal to buy our debt might be the only thing that will bring fiscal responsibility back to Washington. Sadly, the idea of the federal government shrinking to fit tax revenues isn’t even on the radar at the moment. That’s where the Democrats’ end lies…they’ve put us into massive debt in order to bribe the American people with unsustainable benefit programs. When those programs go away they are looking at a massive revolt.

They’re running out of options. They either must severely cut back benefits at a point in time where millions of Baby Boomer voters will drive up demand for those services, or they must adopt across-the-board tax increases. You can only fleece a shrinking upper class for so long. Right now they’re attempting to hide the tax increases through cap-and-trade and increased business taxes, but eventually they will have to turn to eating its own voter base (i.e. the poor and middle class).

Add to that their attempts to marginalize the opposing party through a WH-controlled census and the funneling of billions of taxpayer dollars to voter fraud organizations like ACORN, and eventually they will run out of people to blame.

Not only that, but we have an unserviceable debt. When you work in Social Security IOUs and unpaid Medicare obligations, along with an explosion in demand for those benefits over the next twenty years, we’re looking at an actual debt of well over $100 trillion. Even if you could tax 100% of GDP it would take decades to pay off (not to mention the diminishing returns of doing so).

Even if Congress has a “Come to Jesus” moment and decides to become limited government Constitutionalists, we’re still looking at two to three generations of punitive taxation in order to pay back the existing debt.

I see several end-game strategies here, and none of them are pretty:

1. We inflate our way out of debt, destroying the currency, turning the U.S. into another Argentina, and possibly inciting war with China;

2. We make huge political and financial concessions to our debt-holders in exchange for debt forgiveness;

3. We turn to even more punitive taxation to pay for our debt, stagnating our economy for generations;

4. The federal government declares bankruptcy, and we sell off assets to our adversaries while cutting off millions from government aid, weakening our military as well as our allies.

5. Congress comes to its senses, reduces the size and cost of government, but still must maintain punitive taxation rates for decades in order to pay off existing debt, in turn delaying true economic recovery for the majority of this century.

The only problem with defaulting on our loans is that it may spark either a trade war (meaning all those cheap Chinese goods we’re used to buying up either go away or skyrocket in price) or an all-out war (I’m sure China would love to take over California, the world’s eighth largest economy and within bomber range).

Honestly with the way my state is run, I might actually welcome our new Chi-Com overlords. At least they’re admitting that some capitalism is good, and might actually build some power plants for a change. The idiots in Sacramento are still in their socialist fantasyland while trying to power the state at 1950s capacity levels.

If they tried to invade California, the Navy would stop them before they ever got here. They can’t transport that many men across the Pacific unnoticed, and our nuclear powered vessels are a lot faster than their transport ships. Bombing us won’t work either, because we can do a lot worse to them, granting them a lot less warning. If they use nukes, they lose their major cities, and the Marines will conquer what’s left. They can’t invade us, they can’t win a conventional war, and a nuclear war wouldn’t even be close.

Fiat currencies – LOL the math behind the USD (and the rest of the global currencies for that matter) is already at the insane level. The chickens will come home to roost, perhaps next week, month or in a few years – nobody can predict when. This grand global ponzi scheme will be the bubble to end all bubbles when it collapses. Gold, bullets and food will be the only currency that you will be able to trade with. Perhaps out of the ashes we will see some sense. Wait until inflation hits and see if interest rates can rise to the 20%+ (after all that is the only tool the Fed will have to contain this cancer) and see what that does to what’s left of the housing market, commercial real estate and business lending and consumption based credit. Go team Obama!

Good article. In my last article I wrote that the sin of China is not that they sell us cheap stuff, but that they don’t respect our intellectual property. I’d love to see the US take China aside and say “guys, it’s really not working out… We just spoke to Chile and they’re happy to take some of our factories and buy our debt and even agree to anti-piracy audits. It’s a tough economy and I’m sure you have to understand that we need to go with the best deal. it’s been nice working with you, if you need a reference let us know…”

Good point about Obama refusing to fight the Chinese…BUT…we cannot assume our troops are loyal to Obama. A military coup is not outside the realm of possibility. There already are rumblings within the military about our phony (possibly foreign) commander in chief.

Nonsense. Cut off trade with the Chi-Coms and their government falls within a week.
We have a much firmer grip on their testicles then they do on ours. Of course, a lot of that is due to the relative size difference. It is hard to get a good grip on a pair of BB’s.

When Bolton left, he took the last pair with him. Hillery has some huge ones, but she is just biding time at State, waiting for the Usurper to crash and burn.
America has all the cards, but no will to use them.
You and those that think like you are getting bluffed.
Want to see the Chi-Coms AND the Russians toe the mark? Withdraw from the NPT. That will allow the USA to sell nukes to Korea, Tiawan, Poland, Germany, etc.
Poland with nukes will have Puttie changing his drawers.
ROC with nukes will have whoever runs the PRC growing ulcres by the bushel. Since the NPT outlaws attacks by nuclear states on non-nuclear states, it will also make the Mad Dog Mullahs sit up and take notice.

I heard and read that China holds about $1 trillion in U.S. Government securites. 1/14th of our GDP and 1/19th of our debt through 2019. So what are you taking about? Even at $2 trillion, your thesis doesn’t make any sense. We heard this same nonsense about Japan, several decades ago. Like global warming cuased by man, a few decades after the global cooling scare, you people in NY and Washington don’t know your butts from a hole in the ground. The attempts to manuever around each other politically, just make my ass tired, as the old saying goes.

As you see from Chart #1, the PRC is projected to surpass the USA in 2050. I don’t believe that for a second, but they might. I suspect what will happen is the USA will crash past the PRC about 2014.
It would be a lot easier to just default on the bonds. Then PRC is out a few trillion and the USA is what…….?
As far as giving ROC to the PRC, it wouldn’t matter. The PRC is in no way able to invade the ROC. The PRC is VERY weak from the Military POV. They have a lot of troops, but that doesn’t matter in the 21st century when those troops are armed with antique weapons.
Besides, the Usurper won’t be around long enough to make any serious strategic difference. I expect Russia to take back the Ukraine. Georgia was a rehearsal for that and as soon as the Russians get the problems they found in over running Georgia fixed, the Ukraine will once again be a Sovi……er, Russian client state.
So what? Bad for the Ukraine, but that is a European problem, not an American one. The Lesson from Georgia was that the USA isn’t going to stand up for the little guys anymore. ROC has figured that out, which is why they are making their own weapons now. The Euros haven’t figured it out, but that is their problem.

Here’s my take, and it’s filled with irony. First, China is acting just like a capitalist country, economically. I don’t believe the rights of citizens have ever been their greatest concern. But that will happen the more capitalism becomes their dominant mode. People need the freedom to invent and to choose which products to buy–and this necessitates an idea of a free individual.

Second, China has been acting as the conservative economic voice in America, since President Obama is not listening to the Republicans. Although China has been purchasing our debt, they haven’t purchased enough. China has told Secretary Clinton in very clear terms that they will not be buying the debt if the US currency falls, government spending grows excessively, and the economy continues to shrink. So in terms on international relations, China has been acting as the Tea Party of the World.